Correlation Between American Hotel and Wishpond Technologies

Can any of the company-specific risk be diversified away by investing in both American Hotel and Wishpond Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Hotel and Wishpond Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Hotel Income and Wishpond Technologies, you can compare the effects of market volatilities on American Hotel and Wishpond Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Hotel with a short position of Wishpond Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Hotel and Wishpond Technologies.

Diversification Opportunities for American Hotel and Wishpond Technologies

0.79

Correlation Coefficient

American Hotel  Wishpond Technologies

Poor diversification

The 3 months correlation between American and Wishpond is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and Wishpond Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wishpond Technologies and American Hotel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Hotel Income are associated (or correlated) with Wishpond Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wishpond Technologies has no effect on the direction of American Hotel i.e., American Hotel and Wishpond Technologies go up and down completely randomly.

Pair Corralation between American Hotel and Wishpond Technologies

Assuming the 90 days trading horizon American Hotel Income is expected to generate 1.84 times more return on investment than Wishpond Technologies. However, American Hotel is 1.84 times more volatile than Wishpond Technologies. It trades about 0.18 of its potential returns per unit of risk. Wishpond Technologies is currently generating about 0.08 per unit of risk. If you would invest  36.00  in American Hotel Income on December 1, 2024 and sell it today you would earn a total of  32.00  from holding American Hotel Income or generate 88.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Hotel Income  vs.  Wishpond Technologies

American Hotel Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Hotel Income are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, American Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wishpond Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wishpond Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Wishpond Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Hotel and Wishpond Technologies

The main advantage of trading using opposite American Hotel and Wishpond Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Hotel position performs unexpectedly, Wishpond Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wishpond Technologies will offset losses from the drop in Wishpond Technologies' long position.

The idea behind American Hotel Income and Wishpond Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.